Media Contact:
Mark Wigfield, (202) 418-0253
mark.wigfield@fcc.gov
For Immediate Release
FCC ADVANCES COMPETITION AND INVESTMENT IN
THE BUSINESS DATA SERVICES MARKET
Modernized Framework Will Spur Delivery of New Products & Services,
Benefiting Consumers, Businesses
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WASHINGTON, April 20, 2017 – Recognizing substantial and growing competition in the
market for business data services, the Federal Communications Commission today eased outdated
pricing rules to enable continued robust growth in the market.
Business data services, known also as BDS, are dedicated connectivity used by businesses, non-
profits, and government institutions to meet their needs for secure and reliable communications.
Lower bandwidth services, such as DS1s and DS3s, are a segment of the BDS market referred to
as special access. BDS is essential to the production and delivery of goods and services across
the economy, from connecting bank ATM networks and retail credit-card readers to providing
enterprise business networks with access to branch offices, the Internet or the cloud.
Traditional special access services offered by local phone companies (incumbent local exchange
carriers, or ILECs) have long been subject to FCC price regulation. But these legacy networks,
which operate on yesterday’s copper-based “TDM” technologies at relatively low speeds, are
becoming increasingly obsolete.
Instead, high-bandwidth applications, like video and teleconferencing, are driving demand for
modern, high-speed Ethernet packet-based networks. Such networks are often deployed by
lightly-regulated competitive carriers, which now account for nearly half of the $45 billion BDS
marketplace. In addition, cable-based BDS has been growing by approximately 20% annually for
the past several years, a competitive trend that is expected to continue.
Relying on more than ten years of study of the market, a massive data collection, and a robust
public record garnered from numerous requests for comment, the Report and Order adopted by
the FCC today recognizes the strong competition present in the BDS market. Given that
competition, the order finds that legacy regulation inhibits the investment required for the
transition of BDS from legacy TDM networks to high-speed Ethernet connectivity. In response,
the Order modernizes regulation in significant portions of the market.
Key findings and resulting changes include the following:
? Competition for packet-based services at speeds exceeding 45 Megabits per second (the
top speed of TDM “DS3” services) is widespread, making pricing regulation
counterproductive for these services
? Continued price regulation for legacy TDM-based BDS in areas deemed competitive may
stifle investment and inhibit the transition to modern IP services. The Order adopts a
competitive market test which determines that pricing regulation is no longer required
when either of the following conditions are met:
o 50 percent of the buildings in a county are within a half-mile of a location served
by a competitive provider, or
o 75 percent of the census blocks in a county have a cable provider present
? After a transition period, ILECs in counties meeting the competitive market test will no
longer file tariffs with the FCC. However, rates must continue to be just and reasonable
? In counties that do not meet the competitive market test, the Order retains price
regulation for lower speed TDM connections to end-users. The Order allows ILECs to
offer volume and term discounts, as well as contract tariffs (known as “Phase I pricing
flexibility” under the FCC’s old rules)
? The Order levels the regulatory playing field for ILECs by extending uniform
forbearance from certain rules that had previously been granted unevenly. This change
includes forbearance from tariffing for all packet-based BDS
? The Order updates price cap regulation where it remains by reducing the cap annually by
2 percent on a going-forward basis to account for productivity gains. This productivity
adjustment is known as the “X-factor.” While the X factor has not been adjusted since
2005, when it was set at the rate of inflation, the Order concludes that no catch-up
adjustment is warranted since inflation offset productivity gains for TDM services. The
new X-factor takes effect on December 1, 2017
? Packet-based and TDM telecommunications services continue to be subject to statutory
requirements that rates, terms, and conditions be just and reasonable, enforceable through
the complaint process. The Order also concludes that certain business data services
constitute private carriage rather than common carriage
Action by the Commission April 20, 2017 by Report and Order (FCC 17-43). Chairman Pai and
Commissioner O’Rielly approving. Commissioner Clyburn dissenting. Chairman Pai,
Commissioners Clyburn and O’Rielly issuing separate statements.
WC Docket No. 16-143; GN Docket No. 13-5; WC Docket No. 05-25; RM-10593
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This is an unofficial announcement of Commission action. Release of the full text of a Commission order
constitutes official action. See MCI v. FCC, 515 F.2d 385 (D.C. Cir. 1974).